However much we on both the left and right of the political spectrum criticize the media, they are not the “enemy of the people,” as President Trump is wont to say. Nor are journalists and reporters “dishonest and despicable people,” as Trump alleges as he whips up his base of supporters. Although we, including this scribe, lampoon the inflated egos of the electronic media celebrities, the profession of journalism consists of dedicated pros trying to do their jobs. 

The media understandably concentrates on attention-grabbing news of the day, including of late, the McCain funeral and scandals, existing and impending, of the Trump Administration. While not everything can be covered with equal thoroughness, there are deeply troubling actions of the Trump Administration that are grossly under-reported, lost in the flurry of the more dramatic.

Deregulation of financial institutions, toxic substances, and environmental issues in general, are among the relatively neglected topics that are important to the future of this nation, but overwhelmed by more dramatic current malfeasance in Washington. After all, as important as regulations are, such discussion can be complex, boring to readers and difficult for journalists to report in an interesting way.

We are a decade out from the Great Recession of 2007-08. If there were lessons learned, they were soon forgotten. Banking and financial regulations instituted after the Great Depression of the 1930s, with the intent of preventing another economic depression, were eliminated during the prosperous years of the late 20th and early 21st centuries. While there were multiple causes of the Great Recession of 2007-08; lack of financial regulation contributed significantly to the worst economic crisis since the Great Depression.

Rather than discuss specific regulations, let’s examine the nature of discussion of this often-boring topic. Two relevant concepts that inhibit rational discussion are “the fallacy of limited decisions,” and “false choices.” 

The fallacy of limited decisions falsely assumes that there are a limited number of decisions to be made in the world. Therefore, if an individual or political body makes a decision, this automatically limits the freedom, or decisions, available to everybody else.

This is nonsense. Let’s use the example of traffic lights that “limit the freedom” of drivers to just roar through when they get to the intersection. By limiting, and timing of flow through that intersection, it greatly increases the likelihood of safe passage, freeing up the worry of going through that congested intersection.

The “false choice” fallacy consists of posing two polar positions as the only options in a controversy. It is often used either to push a particular position, or to limit debate, preventing discussion of satisfactory means of resolving the dispute.

How does each of these apply to financial and environmental regulations?

With bank failures during the Great Depression, many depositors lost their money. Because of fear of losing their money, depositors would make a “run on the bank” if it was rumored to be in trouble. The very chance of losing deposits actually increased runs on banks. To address this problem, the Federal Deposit Insurance Corporation was established, guaranteeing that depositors would not lose money even if the bank failed.

While the FDIC was designed to protect depositors, it also reduced bank failures. Even if a bank was rumored to be in trouble, depositors, knowing that their deposits were federally insured, did not have the incentive to make a “run on the bank.”

The regulation that impelled banks to contribute to the FDIC not only freed depositors from worry, it benefitted banks whose “freedom” was somewhat limited, so to speak, by the regulations.

The Glass-Steagall Act emanating from the Great Depression separated commercial banking from investment banking. That act was eliminated during the high-flying times of the 1990s. Regulations that once applied to commercial banks did not apply to non-depository institutions such as investment banks. Investors seeking high returns purchased mortgage-backed securities during the housing boom. Borrowers were encouraged to buy houses with minimal down payments, and even with no money down. When the housing market collapsed, borrowers defaulted on loans, taking with them financial firms over-leveraged with insecure mortgage-backed securities.

Would proper regulation have prevented this debacle? No amount of regulation will totally guard against all contingencies. But this is where the “false choice” fallacy comes in.

President Trump and some Republicans campaigned against the Dodd-Frank legislation that imposed regulations on banks on the grounds that it is too restrictive. But again, the fallacy, the false choice of “regulation vs. no regulation.”

Among the criticisms of Dodd-Frank is that it imposes hardships on small banks. This criticism is doubtlessly valid — it was not our small-town banks that were the problem. But the answer is not to sweep away all regulations. The logical solution is the difficult, grueling, boring, and — unexciting to politicians, the media and the public — process of tailoring regulations to the problem.

The same logic applies to financial markets. Wall Street operators cringe at regulation. But to the extent that investors have faith in the integrity of markets, Wall Street benefits by attracting capital from around the world.

On environmental issues the fallacy of limited decisions holds that limiting the ability of factories to discharge toxic wastes limits freedom and imposes economic costs. But “limiting freedom” to discharge toxic wastes into water and the atmosphere must be weighed against the freedom of the public to breathe safe air and enjoy benefits of clean lakes and streams and safe drinking water.

Again, false choices of regulation vs. no regulation come into play. The difficult challenge is to formulate regulations that are feasible and enforceable, while achieving broader objectives.

Advocates of deregulation will continue to rely on the fallacy of limited decisions, claiming that “regulations limit freedom.” And they will frame the debate with false choices, as if those were the only options.

Policy makers need to cut through the fog cast by these fallacies.

— John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Saturdays in the Monroe Times.